In-Depth

Obsolete Software Draining IT Budgets

Almost all large organizations are paying for obsolete software that they’re not using, and some are paying a lot more than others, according to a new survey

• By Stephen Swoyer
• 01/18/2005

Most organizations earmark a sizeable chunk of their annual IT budgets—sometimes 50 percent or more—for software licensing, maintenance, and support costs. What’s surprising is that some of these costs are almost completely unnecessary. Fact is, almost all large organizations are paying for obsolete software that they’re not using, with some companies paying a lot more—to then tune of tens of billions of dollars—than others.

That’s the upshot of a recent online survey of business and IT executives conducted by the Business Performance Management (BPM) Forum, an advocacy group founded by Hyperion Solutions Corp.

The BPM Forum surveyed 226 IT professionals and C-level executives during the third quarter of last year. Participants hailed from SMB and Global 2000 organizations alike, but fully one-quarter of respondents were associated with companies that had annual revenues in excess of $500 million. The survey was sponsored by development tools vendor Borland Software Corp. and Cognizant Technology Solutions, an IT services provider.

In the survey, two-fifths of respondents said unwanted applications drain more than 10 percent of their IT budgets, while one-tenth put that cost at more than 20 percent. What’s more, 70 percent of companies said they’re paying for redundant, deficient, or obsolete applications.

While this may not add up to a lot in small organizations, it could cost larger organizations a substantial amount of money, officials argue, perhaps into the hundreds of millions of dollars. If the survey’s findings are correct, these companies could each be wasting tens of millions of dollars on obsolete or little used IT applications or services.

“Companies are challenged with a two-fold problem: There’s too much obsolete software on the infrastructure, yet no one is officially responsible for removing it,” said Donovan Neale-May, Executive Director of the BPM Forum and president of public relations firm Neale-May, in a statement.

Not surprisingly, Neale-May argues that responsibility for dealing with this problem rests with company executives. “Old software doesn’t stay on the corporate network because someone chooses to keep it there; it stays there because no executive takes the initiative to remove it. That’s why this is an issue management needs to address directly,” he said.

Unfortunately, corporate executives seem to be dropping the ball. Just over 40 percent of respondents said that their organizations conduct company-wide software audits only on an “as-needed basis,” while 13.4 percent confessed that their companies never conduct them at all.

Elsewhere, almost 77 percent of respondents said that they are either dependent or extremely dependent on the performance of their software applications. In addition, 63.1 percent indicated that business software is instrumental in helping their organizations attract new business, while 61.1 percent said that they rely on business software for competitive differentiation. At the same time, however, only 36 percent have purchased tools or services to help them benchmark the value of their software investments. What’s more, almost half of participants gave their company low marks for the way IT spending is aligned with the strategic priorities of their businesses.

Why, then, is it the responsibility of corporate executives to address these shortcomings? Simple, says Neale-May: More than half (51.4 percent) of survey participants said that CEOs have a role in specifying and determining enterprise-wide business applications.